Market Commentary

As Gomer Pyle used to say, “Surprise, surprise, surprise!”

Gomer Pyle USMC was a popular American sitcom in the 1960s. It focused on a naïve, do-gooding auto mechanic from Mayberry RFD who joined the military. Gomer Pyle, the much-loved main character, was known for catchphrases such as shazam, golly, and surprise, surprise, surprise.

It’s a three-ring circus!

For centuries people have embraced the circus. Enjoying the sticky fluff of cotton candy while elephants, clowns and trapeze artists perform in the spotlights. Merriam Webster Dictionary defines the experience as wild, confusing, engrossing and entertaining.

Some aspects of that description apply to recent financial market activity. Last week, we saw...

Investors aren’t happy, but stocks are up.

If you ever participated in a fantasy football league, you may have experienced a run on a position during your draft. One person picks a quarterback or tight end mid-round and, suddenly, almost everyone rushes to follow suit. A similar occurrence may be happening in the United States stock market.

The debt ceiling standoff continues.

Consumers aren’t optimistic. The Consumer Sentiment Index fell to a six-month low in May, dropping 9.1 percent month-to-month. Participants in the University of Michigan survey were...

The labor market just keeps growing…and growing…

Last week, the April employment report for the United States arrived. It showed that unemployment dropped to the lowest level in more than 50 years – 3.4 percent. Other highlights included:

Get real!

Despite more than a year of aggressive Federal Reserve rate increases, the United States economy is still growing, albeit more slowly. U.S. gross domestic product (GDP) – the value of all goods and services produced in the U.S. economy – grew by 5.1 percent over the first quarter.

Better than expected.

It’s earnings season – the time when publicly traded companies report on how profitable they were during the first quarter of 2023. So far, reports suggest that companies listed on United States stock exchanges did better than many had anticipated. Almost 20 percent of companies in the Standard & Poor’s 500 Index have reported and three-out-of-four have exceeded earnings expectations...

Keep your eye on the big picture.

Last week, there was nothing too surprising in economic and financial news.

Inflation eased, as expected, although it remained above the Federal Reserve (Fed)’s target rate. The Treasury yield curve remained inverted with three-month Treasury bills yielding more than 10-year Treasury notes, as they have been since November 2022. Also, we may be nearing an end to rate hikes around the world. Bloomberg News reported:

Ambiguous images.

Some illustrations are optical illusions. When two people view the picture, they may see completely different images. A good example is Rubin’s Vase. One viewer may see a vase, while another sees two faces.

Current economic conditions can be interpreted in different ways, too. Recent economic data and a possible credit crunch, resulting from upheaval in the banking sector, suggest growth is slowing. After viewing the data, some say we’re heading for a soft landing, and others say a recession is coming.

Perhaps we should call this a pushmi-pullyu market.

The first quarter of 2023 brought Dr. Dolittle’s ficitional pushmi-pullyu – the rarest animal of all – to mind. It is the offspring of goat-antelopes and unicorns, and has a head at each end of its body. The pushmi-pullyu’s unusual anatomy allows it to easily and rapidly change direction, making it difficult to catch.

What’s your jam?

When you think of fun, are you running an Arctic marathon? Biking to your favorite burger place? Gaming with friends online? Each has inherent risk: Polar bears and hypothermia, traffic and flat tires, and viruses and identity theft. Those who enjoy these activities, understand the possible risks and manage them.  

Unknowns and uncertainty.

Financial markets were volatile last week as investors parsed the risks around bank closures, central banks offered additional protections for depositors, and regulators took a harder look at bank balance sheets.

Thrown for a loop.

Early last week, Federal Reserve Chair Jerome Powell told Congress the Fed is committed to bringing inflation down to 2 percent. If economic data continues to come in hot, he said, then it’s likely the Fed will raise rates higher than expected and keep them higher for longer.

Sibling discord.

Stocks and bonds are two of the better-known asset classes in the family of potential investments. Last week, they were in opposition.

Is it good news or bad news?

The answer depends on your perspective. Last week, we learned that...

Brace for a bumpy ride.

There were some unwelcome surprises in last week’s economic data that caused markets to reassess expectations for 2023. For example...

This time may be different...or it may not be.

There has been a lot of speculation about how the Federal Reserve’s policies will affect the United States economy. Economists have differing opinions about whether the country is headed for...

What do Samuel Clemens (a.k.a. Mark Twain) and the current economic expansion have in common?

Author and humorist Twain was prematurely reported to be dead. It first happened in 1897. Twain was on a speaking tour in London when rumors that he had fallen ill and died began to circulate. Then, about a decade later, The New York Times reported that a yacht Twain was on had sunk.  

The vicious cycle of inflation.

Last week, we learned that pay increases at central banks in many parts of the world won’t keep pace with inflation. As a result, their employees may not be able to maintain the standards of living they had before inflation began rising. For example, at the United States Federal Reserve (Fed) the maximum pay increase was 5.1 percent for 2022. That’s significantly below inflation which averaged 8 percent last year, reported Jana Randow and Enda Curran of Bloomberg.

“It’s hard to be a contrarian for very long these days because the consensus seems to change so quickly,” opined Ed Yardeni via LinkedIn last week.

We’ve certainly seen a shift in investors’ preferences during the first few weeks of this year. Despite widespread expectations that markets would move lower early in 2023, major U.S. stock indices have trended higher. 

Bullish or bearish?

After last year’s geopolitical turmoil, economic malaise, and tumultuous stock market decline, many financial professionals – from investors to asset managers – have strong opinions about what will happen in 2023.

It’s being called the “Goldilocks” report.

Last Friday, we learned that demand for workers in the United States remained strong in 2022. The unemployment rate dropped to 3.5 percent in December. (It was 3.7 percent in November.)

It’s finally over.

2022 was a dismal year for financial markets. Major United States stock indices moved lower, trimming or eliminating the previous year’s gains.

What a year!

In some ways, it feels as though we lived through several years in 2022. The onslaught of events included, “The first major European war since the 1990s, unprecedented sanctions, energy-price mayhem, bail-outs, global interest rates rising at their fastest pace in four decades, a faltering Chinese economy, an overheating American one, housing markets looking peaky across the rich world, [and] a crypto blow-up for the ages.”

Bad news is bad news, once again.

For months, investors have cheered bad economic news. When the United States economy showed signs of weakness, stock markets often reflected investor enthusiasm. The thinking was that bad economic news would persuade the Federal Reserve to slow the pace of rate hikes. Inflation would slide lower, and recession would be avoided.

What comes next?

The U.S. stock market tends to be a forward-looking vehicle. Investors make decisions today based on what they think may be ahead for the economy, and how economic change may affect the companies they’re considering for investment.

What will it take to slow this economy down?

In 2001, railway workers slowed a runaway train in Ohio by latching a second engine to the back of the locomotive and applying the brakes. In all, the train traveled sixty-six miles over two hours, decelerating from a maximum speed of 47 miles per hour to 10 miles per hour before workers regained control of it, according to CNN.

There was a shift in the winds of monetary policy.

Last week, it became clear the Federal Reserve (Fed) had softened its hawkish stance. The minutes of the central bank’s November policy meeting indicated the Fed was likely to slow the pace of rate hikes soon. There was a caveat, though.

Thanksgiving and football go together like turkey and stuffing.

For some families, though, this year may be more like a turducken, stuffed with American football and the sport the rest of the world knows as football (soccer). The men’s World Cup, which is played every four years for national glory, the Jules Rimet trophy, and millions of dollars in prize money, began on Sunday and will end on December 18.

Last week was remarkable for many reasons.

One reason is that sky watchers around the world had an opportunity to see a total lunar eclipse. The moon, Earth and sun aligned, causing the moon to appear crimson. We won’t see another total lunar eclipse for three years, reported Denise Chow of NBC News.

It's the lag time.

To no one’s surprise, the Federal Reserve continued to battle inflation last week, raising the federal funds rate for the fourth time this year, reported Claire Ballentine of Bloomberg.

Some companies are doing better than others – a lot better.

It’s earnings season; the time when companies share how well they performed during the previous quarter. Earnings reports are important because...

Markets turned – again.

Markets continue to be volatile. Last week, stocks headed north. Nicholas Jasinski of Barron’s reported the change of direction reflected investors’ desire for the market to finally hit bottom.

We’re not there yet.

Investors are understandably eager for the stock market to hit bottom. Some hoped it happened last week, but it did not.